The American Lawyer has an informative article, available here, reporting that Plaintiffs' attorneys in a Massachusetts case, Salvas v. Wal-Mart Stores, have been accused of reaching a collusive settlement with Wal-Mart over unpaid wages.

 

Collusive settlements are a potential risk in all class action lawsuits in which individual plaintiffs have relatively small claims. The rationale behind allowing such class actions is that by aggregating plaintiffs with similar claims, it is possible for them to recover damages, despite the fact that each plaintiff's damages would be too small to be worth litigating by itself. However, the large number of plaintiffs and the relatively small stake of each plaintiff means that the clients are unable to exert the same kind of oversight over their attorneys as plaintiffs have in normal litigation.

 

In ordinary litigation, settlements must be approved by the client, and the client has an interest in maximizing their settlement because of the amount of money involved. This serves as a check on attorneys, who might be willing to accept a lesser settlement offer in order to avoid the delay and costs of further litigation and going to trial, especially in contingent fee cases, where the lawyers receives no fees until the case settles or is resolved in their favor by the court.

 

Because there is less client oversight in small individual claim class actions, attorneys on both sides may wish to settle for less than the claim might potentially be worth, to avoid delay and costs. In a true collusive case, a defendant who recognizes clear liability on their part, may wish to have a friendly plaintiffs' counsel appointed, with whom they know they can reach a quick and inexpensive settlement, potentially shortchanging the class members. As a result, courts generally exercise far more oversight over class action settlements than ordinary settlements.